OMB director: “We’re not saying there’s anything wrong with people earning a lot”

posted at 4:05 pm on September 19, 2011 by Tina Korbe

Jack Lew today couldn’t say how an additional tax on millionaires and billionaires will create jobs — and barely confirmed that he thinks such a tax will at least contribute to deficit reduction. The director of the Office of Management and Budget appeared this morning on Fox News’ “Happening Now” to defend the president’s just-announced proposals to trim the deficit — proposals that are a part of his overall jobs plan. Fox’s Jenna Lee asked Lew how the tax will reduce the nation’s high rate of unemployment.

“Today’s plan puts into place a balanced, fair approach to doing the $4 trillion of deficit reduction we need to get to a point where our deficit as a percentage of the economy is at a sustainable level,” Lew told her. “Whichever way you go is a hard choice. There’s a Republican budget in the House that would make severe changes in Medicare and turn it into a voucher program. It would reduce spending on things like education and research and development to the point where we couldn’t invest in what we need for the future.”

Better to tax the super rich, Lew suggested.

“We believe there’s a fundamental unfairness to have middle class people paying higher marginal tax rates than millionaires and billionaires,” Lew said. “We’re not saying we should have a confiscatory tax rate; we’re saying it’s just not fair to have a world where it’s so unbalanced.”

Lee conceded fairness in the tax code is a laudable goal, but again pressed Lew as to how the tax will grow jobs. She wondered: Which of the president’s proposals specifically will improve the jobs situation? Lew didn’t have an answer.

“If you look at the overall package, the things that will create jobs are, first of all, passing the Americans Jobs Act by doing the things that would create demand now and directly create jobs through public works like roads and bridges and keeping teachers and firemen and policemen on the rolls,” Lew said.

At that point, Lee stopped trying and took the tack of this question instead: The revenues from the tax will at least go straight to deficit reduction, right? Well, sure, Lew (sort of) said.

“Well, obviously, it’s a package that overall will reduce the deficit,” he said. “The overall revenue is connected to the overall spending and if you net are bringing down your deficit, yes, it’s very much contributing to bringing down the deficit.”

Seemingly sensing that he had rejected the only two reasonable justifications for the tax — that it will either create jobs or reduce the deficit — Lew fell back on the “it’s not fair” argument.

“We’re not saying that there’s anything wrong with people earning a lot and being very successful,” he concluded lamely. “What we’re saying is it’s not fair to say those people should pay lower taxes than people who are earning much less.”

But while the president says Warren Buffett is paying less in taxes than his secretary, it’s not exactly accurate to say all millionaires and billionaires pay lower taxes than people who are earning less.

In 2009, 236,883 people reported more than $1 million in income — and paid $177 billion in federal income taxes, according to an infograph on Fox. That represents 0.2 percent of all federal tax returns, but makes up more than 20 percent of all income tax payments.

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“We’re not saying that there’s anything wrong with people earning a lot and being very successful,” he concluded lamely. “What we’re saying is it’s not fair to say those people should pay lower taxes than people who are earning much less.”

How are they paying less? If we’re talking federal income tax rates, they’re in a higher bracket than the middle class income earners. Now if they’re like Buffett and earn their money from capital gains, then of course their rate will be lower because that’s not taxed as ordinary income. And if you start to tax capital gains as ordinary income, you can forget about anyone investing here ever again.

Obama trots out all of these billionaires who allegedly tell him, “Please raise our taxes.” Rather than spending everyone else’s money, ifthey feel so generous, rather than raising taxes, why not just have them donate to reduce the debt?

“We believe there’s a fundamental unfairness to have middle class people paying higher marginal tax rates than millionaires and billionaires,” Lew said. “We’re not saying we should have a confiscatory tax rate; we’re saying it’s just not fair to have a world where it’s so unbalanced.”

It just strikes me, all the reference to the “middle class bearing so much of the burden” so we have to raise taxes on the rich yet there is no corresponding talk about reducing said burden on the middle class.

Simply raising taxes on the wealthy doesn’t reduce the burden of those in the middle if those rates aren’t reduced, right? Wouldn’t the true fair thing be to reduce the rate of the middle-class then raise the rate on the evil rich?

What it creates is an unscalable wall for the middle class to climb and become the “wealthy”.
As the middle class enters the realm of the “wealthy”, they are beaten back by high taxes.
The people already there, they can dodge and maneuver to avoid the taxes, or “ride them out” with added investments.
This is not to “tax the wealthy” but to keep the middle class in their place…

Want to talk about a FAIR tax system, how about making those people pay their fair share?

angryed on September 19, 2011 at 4:24 PM

I believe that figure is skewed…thrown out a lot, but I think it is based on tax returns, and many people pay throughout the year, so their tax liability at the end of the year is $0 or they receive some back. But they paid taxes every paycheck.
The more accurate figure would be, how many actually paid any taxes at all…

Want to talk about a FAIR tax system, how about making those people pay their fair share?

angryed on September 19, 2011 at 4:24 PM
I believe that figure is skewed…thrown out a lot, but I think it is based on tax returns, and many people pay throughout the year, so their tax liability at the end of the year is $0 or they receive some back. But they paid taxes every paycheck.
The more accurate figure would be, how many actually paid any taxes at all…

right2bright on September 19, 2011 at 4:40 PM

Sorry but your comment doesn’t make sense.

The statistics on taxes are not based on the refund amount or tax payment due but on the total tax however paid. Any other way would be meaningless. My goal as an accountant is to have my clients pay in the correct amount and have neither a refund or a payment due when they file.

Fact is, unlike most other folks, Warren Buffett gets most of his ‘income’ from dividends and capital gains, which are nominally taxed at 15 percent.

Fallon on September 19, 2011 at 4:28 PM

Exactly…so to address O’Bonehead’s hand-wringing concern that Buffett is paying a lower effective tax rate than his janitor, we should do one of two things:

1. Pass a flat tax and eliminate all forms of deduction, or
2. Pass an alternative minimum billionaire tax rate, so that those Buffett-boys who are able to avoid taxes by taking dividends and capital gains and not ordinary income are taxed at the higher of the Federal income or capital gains rate.

This will result in a very targeted tax increase on only those who O’Bonehead and Buffett claim are getting away with murder, and of course will solve exactly nothing. And Buffett will pay millionaire tax lawyers a lot of money to avoid that increase, of course, and then not pay the bill when his lawyering fails.

I believe that figure is skewed…thrown out a lot, but I think it is based on tax returns, and many people pay throughout the year, so their tax liability at the end of the year is $0 or they receive some back. But they paid taxes every paycheck.
The more accurate figure would be, how many actually paid any taxes at all…

I wonder, does Obama believe in “From each according to his ability, to each according to his need.” Isn’t that what this whole “fair share” argument comes from? Someone should corner him with that question so he can rightfully be linked with that other guy who made that slogan popular.

This is typical liberal sleight of hand. Millionaires do not pay less taxes than “those who make less money.” That, truly, would be unfair. Millionaires pay less taxes as a percentage of total income than those who make less money. It’s a huge difference.

A system where billionaire Warren Buffet paid $30,000 and I paid $35,000 would lead me to kill Warren Buffet where he stood. But if I pay $35,000 (say 25% on $140,000) and Warren Buffet pays $10M (20% on $50M)–that’s not necessarily unfair.

If you think every one owes a percent to the government of every dollar they make (after making allowances for basic living expenses) then you will think the current system unfair. (Logically, you should also be for a flat tax, but liberals never are).

If, however, you think every person above the poverty level has a duty to support the government up to a certain point, and after that, they get to keep what they made through their own hard work and ingenuity, then you are a greedy, racist, bastard who wants people to die faster.

But while the president says Warren Buffett is paying less in taxes than his secretary, it’s not exactly accurate to say all millionaires and billionaires pay lower taxes than people who are earning less.

Not exactly accurate? No kidding! How about it’s an “abject falsehood”? Heck, even Buffett doesn’t claim they pay less taxes – just that they pay taxes at a lower rate.

I still want to see this alleged secretary of Buffett who is paying a higher % in taxes than he is. I don’t believe she exists.

Ed/Allah/Tina…how about looking into this.

angryed on September 19, 2011 at 4:27 PM

It does sound like a dead Chicago fish story. Considering the source is cheek to cheek with Obama and Obama has such a solid reputation for telling the truth, honest, it has to be true. Just ask dingy Harry, he’ll vouch for it and the dame too!

Lets see, My stepfather was a millionaire and my father was an average man who worked for a paycheck and for a while was on welfare. It was a unique experince of life but one that afforded me live at both ends of the economic spectrum. My over all observation is that the rich have the same bills as everyone else, just bigger.

It is probably reasonable to assume that the lower class make up most of that 46%+ that do not pay taxes and recieve the automatic deductions as a tax refund. The lower class essentially drains tax revenue paid by the other tax payers without much of a contribution to the economy. They are surviors but generally happier than most.

The lower middle income earners are paying 25% of their income, or less if they managed to wipe out the tax they owe with a large number of dependents or allowed deductions. For the most part they are hoping that the taxes taken out of their paychecks will cover the tax bill and give a little bit back, which is taxed again as income for the next year.

This is the class that the Obama’s economic advisors believe will revitalize the economy if they have more money to spend. This ecomomic model is found in the first few pages of any text on economics as a “basic” example of an economic cycle. I usually reached that example in the first fifteen minutes of my classes. I can easily see his advisors as the kid who was already catching up on missed sleep by that time.

The upper middle is the class, the 200-250K Obama millionairs that Obama thinks has all his money is, in a basic sense, split into two catagories, both important to our economy.

The first are the small business owners. This part of the upper middle class are the entrepreneurs, usually not rich or posses a high level of education, that are taking a risk in hopes of creating a better life for themselves. They are ones that create the jobs that the majority of Americans have. Not all are successful. A large number due to poor planing, location, poor busness decisions, or simply not planning or have the ablility to plan for the future cost of business, will fail within the first year. Many more will fail if taxes are increased for lack of expendable revenue to keep the business going. With the jobs goes the income that Obama and his nitwits are trying to create with the stimulus paid for by the tax increases.

The second group consist of those who have education or skills that allow them to earn an income without the risk of the entrepreneurs. This group tends to be affluent as compared to the first group. They can afford tax services and shelters to keep more of their income. They have more expendable income that can buy more products and services and be invested in other facets of the ecomomy. This group could absorb a higher tax rate with a lowered life style and the loss of expendable income that was available for investment before the tax increase, which has a negative ripple effect on the entire economy.

The upper class is not likely to suffer much from a tax increase. They usually can afford to find ways to protect their income now with investments and shelters until a later time when they can take advantage of less taxable income. The need to shelter income reduces the expendable income that would have been invested in ways that grow the ecomony. Particulialy hurt will be the small businesses who depended on the upper class investments to allow them the funding needed to open or run their business.

How they think that raising taxes on the middle class will result in a stable economic modle with equal percentages of taxes paid is puzzling. Equally puzzling is the assumption that some how this creates jobs and expancs the economy. Obviously considering the source will explain goes a long way to explaining it.

If there really is some logical thought to rasing middle class taxes it must be in the reality that socialism must fail to suceed so that the command economy of communsim will be accepted.